DEFINITION OF TERMS:
OUTSOURCING
FROM: http://en.wikipedia.org/wiki/Outsourcing
Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources[citation needed]. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour.Out sourcing in the information technology field has two meanings One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.
Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.
Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.
With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting. They are able to complete tax returns across seas for people in America.
Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.
Strategic outsourcing is the organizing arrangement that emerges when firms rely on intermediate markets to provide specialized capabilities that supplement existing capabilities deployed along a firm’s value chain (see Holcomb & Hitt, 2007). Such an arrangement produces value within firms’ supply chains beyond those benefits achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain. Partitioning of intermediate markets occurs as the coordination of production across a value chain is simplified and as information becomes standardized, making it easier to transfer activities across boundaries.
Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants (see sourcing advisory) or outsourcing intermediaries to assist in scoping, decision making, and vendor evaluation.
ACTIVITIES FOR OUTSOURCING
Research & Development
The competitive pressures on firms to bring out new products at an ever rapid pace to meet market needs are increasing. As such, the pressures on the R&D department are increasing. In order to alleviate the pressure, firms have to either increase R&D budgets or find ways to utilize the resources in a more productive way. There are situations when a firm may consider outsourcing some of its R&D work to a contract research organizations or universities. Reasons why a firm could consider outsourcing are:
* new product design does not work
* project time and cost overruns
* loss of key staff
* competitive response
* problems of quality/yield.
The key drivers for R&D outsourcing are emerging mass markets and availability of expertise in the field. In this context, the two most populous countries in the world, China and India, provide huge pools from which to find talent. Both countries produce over 200,000 engineers and science graduates each year. Moreover both countries are low cost sourcing countries. Other strategic drivers for outsourcing R&D are access to expertise and intellectual property, filling gaps in the capabilities of the R&D function, managing risk better, reducing the time to market, and focusing on the core competence or activities of the firm.
CRITICISMS OF OUTSOURCING
Quality Risks
Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.
Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. India IT shops will continue to reduce the quality of human capital[citation needed], under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits. Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time[citation needed]. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the India outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources is worse off than before it outsourced its workforce to India.
Public opinion
There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. [21] On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.
Language skills
In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced[citation needed]. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and offshored.
The public generally find linguistic features such as accents, word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties.
In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or mis-communications.
Social responsibility
Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.
On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees.
Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labor for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.
Quality of service
Quality of service is measured through a service level agreement (SLA) in the outsourcing contract. In poorly defined contracts there is no measure of quality or SLA defined. Even when an SLA exists it may not be to the same level as previously enjoyed. This may be due to the process of implementing proper objective measurement and reporting which is being done for the first time. It may also be lower quality through design to match the lower price.
There are a number of stakeholders who are affected and there is no single view of quality. The CEO may view the lower quality acceptable to meet the business needs at the right price. The retained management team may view quality as slipping compared to what they previously achieved. The end consumer of the service may also receive a change in service that is within agreed SLAs but is still perceived as inadequate. The supplier may view quality in purely meeting the defined SLAs regardless of perception or ability to do better.
Quality in terms of end-user-experience is best measured through customer satisfaction questionnaires which are professionally designed to capture an unbiased view of quality. Surveys can be one of research. This allows quality to be tracked over time and also for corrective action to be identified and taken.
Staff turnover
The staff turnover of employee who originally transferred to the outsourcer is a concern for many companies. Turnover is higher under an outsourcer and key company skills may be lost with retention outside of the control of the company. In outsourcing offshore there is an issue of staff turnover in the outsourcer companies call centers. It is quite normal for such companies to replace its entire workforce each year in a call center. This inhibits the build-up of employee knowledge and keeps quality at a low level.
Company knowledge
Outsourcing could lead to communication problems with transferred employees. For example, before transfer staff have access to broadcast company e-mail informing them of new products, procedures etc. Once in the outsourcing organization the same access may not be available. Also to reduce costs, some outsource employees may not have access to e-mail, but any information which is new is delivered in team meetings.
Qualifications of outsourcers
The outsourcer may replace staff with less qualified people or with people with different non-equivalent qualifications. In the engineering discipline there has been a debate about the number of engineers being produced by the major economies of the United States, India and China. The argument centers around the definition of an engineering graduate and also disputed numbers. The closest comparable numbers of annual graduates of four-year degrees are United States (137,437) India (112,000) and China (351,537).
Failure to deliver business transformation
Business transformation has traditionally been promised by outsourcing suppliers, but they have usually failed to deliver. In a commoditised market where any half-decent service provider can do things cheaper and faster, smart vendors have promised a second wave of benefits that will improve the client’s business outcomes. According to Vinay Couto of Booz & Company “Clients always use the service provider’s ability to achieve transformation as a key selection criterion. It’s always in the top three and sometimes number one.” Often vendors have promised transformation on the basis of wider domain expertise that they didn’t really have, though Couto also says that this is often down to client’s unwillingness to invest in transformation once an outsourcing contract is in place.
INSOURCING
Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.
Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.
According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.
To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.
Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.
The Organization for International Investment, a Washington D.C. trade association, uses the term to describe the creation of jobs through foreign direct investment within the United States.
To further have an idea about their difference and on what factors that we must consider to decide whether what to choose from either outsourcing or insourcing, I read these articles and found it full of important points.
FROM: http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp
What is best for your organization?
If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.
If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.
If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.
It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage!
FROM:http://ezinearticles.com/?Why-Outsourcing-Instead-of-Insourcing?&id=2622522
Why Outsourcing Instead of Insourcing?
By Mary Thomas Platinum Quality Author
There is a big debate going on at the moment and people are constantly arguing whether or not it is better to outsource or to insource. We can mention a lot of good reasons and bad reasons for both but at the end of the day what is important stand in your own personal needs.
The biggest benefit that insourcing has stands in the fact that you get a very close contact with the person you are hiring. This can create a very good working environment but at the same time it does bring in some negative aspects that we have to think about. Unfortunately sometimes we can not find what we are looking for through insourcing. This basically means that what we want done can not be found locally. Such a fact shows us the biggest advantage why outsourcing is preferred in a comparison with insourcing: a wider set of choices. The truth is that when outsourcing we are faced with more people or companies to consider hiring. We are basically moving everything towards a much larger scale. Why outsourcing towards a single area or even country when we can think at a global scale.
If you talk to most Internet Marketers about outsourcing they will tell you that it is a must have. Most of them don't even think about insourcing when we have the possibility of outsourcing. The Internet has made it possible for a lot of people to meet. We now have a chance we never did in the past. In the past we had to invest into newspaper ads and similar actions in order to get in contact with professionals we needed. This does bring everything down in terms of time and possible success. When thinking about why outsourcing is better than insourcing we should always think about numbers. For instance, there is a huge chance that we can spare money by hiring someone from abroad that will do everything cheaper than on a local scale search. Also, the number of potential people worth hiring is much bigger. We can thus make sure at all times that we hire the best professionals we can afford.
There shouldn't be any doubt in anyone's mind that outsourcing is a lot better than insourcing. The reasons mentioned above are just the most obvious but the list can go on. In short, the most important facts we need to consider when thinking whether or not outsourcing is better than insourcing can be written with ease.
Why Outsourcing?
- It is Cheaper
- It is Better
- You can Work with More Competent People
- You can make sure you get what you are looking for
- The Quality is Better in Most Cases
- Marketing time needed to look for people is drastically reduced
- Less Risks
Based on these facts about outsourcing and insourcing, both have their own advantage and disadvantages. The thing that we must focus our attention is on what procedure will the university be well fitted to. And in my opinion, outsourcing is a bad choice for the university and I have 3 reasons that made me come up to this decision.
1. FUNDS
[justify]The university operates using government funds thus it is more likely to be unpredictable and insufficient to meet the university's demands in almost all occasions. Outsourcing will definitely meanburning funds for finding contractors and employing the outsource-rs. This could also mean that the university maybe spending double in theor employee's salary because of hiring another employee with the same capabilities as the employees that the university already have.
2. LACK OF POSSIBLE QUALIFIED OUTSOURCED EMPLOYEES
It is very evident nowadays that the quality of education in the Philippines is depreciating and it may be sad to say but fresh graduates in our field may not be competent enough to meet the demands of the university. The university may look to the veterans but it is most likely for them to seek for greater wages or you may not find a lot of experienced IT persons nowadays because most of them already ventured outside the country.
3. LACK OF BACKGROUND ABOUT THE UNIVERSITY
The system that will be developed by the outsourced persons will definitely something concerning the operations involved in the school. And provided the fact that they are outsiders, it is most likely that they will be unfamiliar with these processes and could be the cause of delay or even failure of the project.
OUTSOURCING
FROM: http://en.wikipedia.org/wiki/Outsourcing
Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources[citation needed]. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour.Out sourcing in the information technology field has two meanings One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.
Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.
Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.
With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting. They are able to complete tax returns across seas for people in America.
Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.
Strategic outsourcing is the organizing arrangement that emerges when firms rely on intermediate markets to provide specialized capabilities that supplement existing capabilities deployed along a firm’s value chain (see Holcomb & Hitt, 2007). Such an arrangement produces value within firms’ supply chains beyond those benefits achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain. Partitioning of intermediate markets occurs as the coordination of production across a value chain is simplified and as information becomes standardized, making it easier to transfer activities across boundaries.
Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants (see sourcing advisory) or outsourcing intermediaries to assist in scoping, decision making, and vendor evaluation.
ACTIVITIES FOR OUTSOURCING
Research & Development
The competitive pressures on firms to bring out new products at an ever rapid pace to meet market needs are increasing. As such, the pressures on the R&D department are increasing. In order to alleviate the pressure, firms have to either increase R&D budgets or find ways to utilize the resources in a more productive way. There are situations when a firm may consider outsourcing some of its R&D work to a contract research organizations or universities. Reasons why a firm could consider outsourcing are:
* new product design does not work
* project time and cost overruns
* loss of key staff
* competitive response
* problems of quality/yield.
The key drivers for R&D outsourcing are emerging mass markets and availability of expertise in the field. In this context, the two most populous countries in the world, China and India, provide huge pools from which to find talent. Both countries produce over 200,000 engineers and science graduates each year. Moreover both countries are low cost sourcing countries. Other strategic drivers for outsourcing R&D are access to expertise and intellectual property, filling gaps in the capabilities of the R&D function, managing risk better, reducing the time to market, and focusing on the core competence or activities of the firm.
CRITICISMS OF OUTSOURCING
Quality Risks
Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.
Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. India IT shops will continue to reduce the quality of human capital[citation needed], under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits. Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time[citation needed]. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the India outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources is worse off than before it outsourced its workforce to India.
Public opinion
There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. [21] On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.
Language skills
In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced[citation needed]. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and offshored.
The public generally find linguistic features such as accents, word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties.
In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or mis-communications.
Social responsibility
Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.
On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees.
Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labor for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.
Quality of service
Quality of service is measured through a service level agreement (SLA) in the outsourcing contract. In poorly defined contracts there is no measure of quality or SLA defined. Even when an SLA exists it may not be to the same level as previously enjoyed. This may be due to the process of implementing proper objective measurement and reporting which is being done for the first time. It may also be lower quality through design to match the lower price.
There are a number of stakeholders who are affected and there is no single view of quality. The CEO may view the lower quality acceptable to meet the business needs at the right price. The retained management team may view quality as slipping compared to what they previously achieved. The end consumer of the service may also receive a change in service that is within agreed SLAs but is still perceived as inadequate. The supplier may view quality in purely meeting the defined SLAs regardless of perception or ability to do better.
Quality in terms of end-user-experience is best measured through customer satisfaction questionnaires which are professionally designed to capture an unbiased view of quality. Surveys can be one of research. This allows quality to be tracked over time and also for corrective action to be identified and taken.
Staff turnover
The staff turnover of employee who originally transferred to the outsourcer is a concern for many companies. Turnover is higher under an outsourcer and key company skills may be lost with retention outside of the control of the company. In outsourcing offshore there is an issue of staff turnover in the outsourcer companies call centers. It is quite normal for such companies to replace its entire workforce each year in a call center. This inhibits the build-up of employee knowledge and keeps quality at a low level.
Company knowledge
Outsourcing could lead to communication problems with transferred employees. For example, before transfer staff have access to broadcast company e-mail informing them of new products, procedures etc. Once in the outsourcing organization the same access may not be available. Also to reduce costs, some outsource employees may not have access to e-mail, but any information which is new is delivered in team meetings.
Qualifications of outsourcers
The outsourcer may replace staff with less qualified people or with people with different non-equivalent qualifications. In the engineering discipline there has been a debate about the number of engineers being produced by the major economies of the United States, India and China. The argument centers around the definition of an engineering graduate and also disputed numbers. The closest comparable numbers of annual graduates of four-year degrees are United States (137,437) India (112,000) and China (351,537).
Failure to deliver business transformation
Business transformation has traditionally been promised by outsourcing suppliers, but they have usually failed to deliver. In a commoditised market where any half-decent service provider can do things cheaper and faster, smart vendors have promised a second wave of benefits that will improve the client’s business outcomes. According to Vinay Couto of Booz & Company “Clients always use the service provider’s ability to achieve transformation as a key selection criterion. It’s always in the top three and sometimes number one.” Often vendors have promised transformation on the basis of wider domain expertise that they didn’t really have, though Couto also says that this is often down to client’s unwillingness to invest in transformation once an outsourcing contract is in place.
INSOURCING
Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.
Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.
According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.
To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.
Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.
The Organization for International Investment, a Washington D.C. trade association, uses the term to describe the creation of jobs through foreign direct investment within the United States.
To further have an idea about their difference and on what factors that we must consider to decide whether what to choose from either outsourcing or insourcing, I read these articles and found it full of important points.
FROM: http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp
What is best for your organization?
If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.
If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.
If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.
It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage!
FROM:http://ezinearticles.com/?Why-Outsourcing-Instead-of-Insourcing?&id=2622522
Why Outsourcing Instead of Insourcing?
By Mary Thomas Platinum Quality Author
There is a big debate going on at the moment and people are constantly arguing whether or not it is better to outsource or to insource. We can mention a lot of good reasons and bad reasons for both but at the end of the day what is important stand in your own personal needs.
The biggest benefit that insourcing has stands in the fact that you get a very close contact with the person you are hiring. This can create a very good working environment but at the same time it does bring in some negative aspects that we have to think about. Unfortunately sometimes we can not find what we are looking for through insourcing. This basically means that what we want done can not be found locally. Such a fact shows us the biggest advantage why outsourcing is preferred in a comparison with insourcing: a wider set of choices. The truth is that when outsourcing we are faced with more people or companies to consider hiring. We are basically moving everything towards a much larger scale. Why outsourcing towards a single area or even country when we can think at a global scale.
If you talk to most Internet Marketers about outsourcing they will tell you that it is a must have. Most of them don't even think about insourcing when we have the possibility of outsourcing. The Internet has made it possible for a lot of people to meet. We now have a chance we never did in the past. In the past we had to invest into newspaper ads and similar actions in order to get in contact with professionals we needed. This does bring everything down in terms of time and possible success. When thinking about why outsourcing is better than insourcing we should always think about numbers. For instance, there is a huge chance that we can spare money by hiring someone from abroad that will do everything cheaper than on a local scale search. Also, the number of potential people worth hiring is much bigger. We can thus make sure at all times that we hire the best professionals we can afford.
There shouldn't be any doubt in anyone's mind that outsourcing is a lot better than insourcing. The reasons mentioned above are just the most obvious but the list can go on. In short, the most important facts we need to consider when thinking whether or not outsourcing is better than insourcing can be written with ease.
Why Outsourcing?
- It is Cheaper
- It is Better
- You can Work with More Competent People
- You can make sure you get what you are looking for
- The Quality is Better in Most Cases
- Marketing time needed to look for people is drastically reduced
- Less Risks
Based on these facts about outsourcing and insourcing, both have their own advantage and disadvantages. The thing that we must focus our attention is on what procedure will the university be well fitted to. And in my opinion, outsourcing is a bad choice for the university and I have 3 reasons that made me come up to this decision.
1. FUNDS
[justify]The university operates using government funds thus it is more likely to be unpredictable and insufficient to meet the university's demands in almost all occasions. Outsourcing will definitely meanburning funds for finding contractors and employing the outsource-rs. This could also mean that the university maybe spending double in theor employee's salary because of hiring another employee with the same capabilities as the employees that the university already have.
2. LACK OF POSSIBLE QUALIFIED OUTSOURCED EMPLOYEES
It is very evident nowadays that the quality of education in the Philippines is depreciating and it may be sad to say but fresh graduates in our field may not be competent enough to meet the demands of the university. The university may look to the veterans but it is most likely for them to seek for greater wages or you may not find a lot of experienced IT persons nowadays because most of them already ventured outside the country.
3. LACK OF BACKGROUND ABOUT THE UNIVERSITY
The system that will be developed by the outsourced persons will definitely something concerning the operations involved in the school. And provided the fact that they are outsiders, it is most likely that they will be unfamiliar with these processes and could be the cause of delay or even failure of the project.
